Yelp: Local reviews via social networking site: why contribute?

So, reviews of local businesses written by local patrons are popular. Why not? Newspapers have always done well running “Best of ___” or “Reader’s Choice” contests. Now we have, Judy’s Book, Intuit’s Zipingo, Insider Pages, and offerings from Yahoo!, Microsoft Live and other players. Even our small city (Ann Arbor, MI) has about 250 businesses reviewed by the newest entrant, Yelp:

And the venture capitalists are giving the new players some dough.
But, why? These sites will make revenues if they sell ads, which should work if there are eyeballs since the eyeballs will be looking specifically for businesses in the local area so advertising on the page should have a good return. But to get eyeballs, these sites have to get volunteer labor to enter ratings and write reviews. And those volunteers come from a diffuse group of local business patrons, many of whom don’t know from Web 2.0, and even fewer know about And even if they know, what’s in it for the volunteers?
It’s possible that these Web 2.0 companies are simply using Incentives 1.0: They could hire paid reviewers who at least seed the site with reviews on a number of popular businesses in each city. Yelp and the others claim that they don’t do this: “real reviews from real people” (I guess we’re supposed to assume that paid employees are not real people). But how would users know if they did? What forfeitable bond is Yelp posting to convince us they are trustworthy? Or if they bribed “real people” to do reviews by sending a salesperson to the establishments and handing out bling in exchange for promises to enter a review?
There’s another old-school way to get review content generated, too: tell the business owners about your site, and they’ll take the initiative to write their own reviews (the “Amazon” problem). And so that they look popular — not just loved by one critic — they ask their mothers and cousins to submit reviews too. Again, how could we tell?

Research presentation: Web 2.0 and ICD

On 20 Nov 06 I gave an invited plenary Association Lecture at the Southern Economic Association Annual Conference in Charleston, SC. The title was “Getting the good stuff in, keeping the bad stuff out: Incentives and the Web“. Here are the slides (not PowerPoint!).
In this talk geared to professional economists I explained the user-contributed content explosion that is one characteristic of so-called Web 2.0, and showed that this is happening through all phases of information production, organization, retrieval and use. I then discussed three fundamental economic issues that arise with user-contributed content: getting the good stuff in (private provision of public goods); keeping the bad stuff out (pollution); and evaluating the stuff (signaling, reputation). Familiar topics to the hordes who read this blog!
I finished with a simple elaboration to illustrate how ICD methods could be used to design mechanisms for dealing with these problems. The model is based on an event that occurred last spring on